question archive Inventory per physical count on December 31, 2020:                                               Home Office    Branch Acquired from vendors                        180,000           20,000 Acquired from home office                                          30,000   Additional information: 1

Inventory per physical count on December 31, 2020:                                               Home Office    Branch Acquired from vendors                        180,000           20,000 Acquired from home office                                          30,000   Additional information: 1

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Inventory per physical count on December 31, 2020:

                                              Home Office    Branch

Acquired from vendors                        180,000           20,000

Acquired from home office                                          30,000

 

Additional information:

1. Inventory transferred to the branch from home office is billed at 125% of cost.

2. The home office received 

3. The branch remitted 25,000 cash to the home office on December 31, 2020. The home office received and recorded this remittance on January 4, 2021.

 

The pre-closing trial balance of Nicole Company and its Angeles City branch for the year ended December 31, 2020 prior to adjusting and closing entries are as follows:

                                                                      Home Office                            Branch

                                                                       Debit               Credit              Debit              Credit

Cash                                                                35,000                                    10,000            

Accounts receivable, net                                     80,000                                    50,000            

Inventory, January 1, 2020                                                                                                       

           From vendors                                      230,000                                    50,000            

           From home office                                                                                 20,000            

Deferred profit                                                                          25,000                                  

Fixed assets, net                                               870,000                                                          

Investment in branch                                       155,000                                                          

Accounts payable                                                                     221,000                                   45,000

Long-term debt                                                                       400,000                                  

Common stock                                                                        300,000                                  

Retained earnings, January 1, 2020                                            350,000                                  

Home office equity                                                                                                                115,000

Sales                                                                                      960,000                                  320,000

Purchases                                                       800,000                                   120,000            

Shipments from home office                                                                              90,000            

Shipments to branch                                                                 84,000                                  

Selling expenses                                              101,000                                    34,000            

Administrative expenses                                    69,000                                   16,000                       

Totals                                                             2,340,000        2,340,000        480,000            480,000

 

Requirement:

I. Prepare the year-end adjusting entries to bring the intra-company accounts into agreement. Be sure to adjust the other accounts in the trial balance as appropriate. 

 

II. Complete the following analysis of the branch's inventory

                                                                      Transfers above cost     Transfers at cost           Mark-up

Beginning inventory

           Acquired from vendors

           Acquired from home office

Purchases (from vendors)

Shipments from office                                                                                                                                 

Goods available for sale                                                                                                                       

Ending inventory

           Acquired from vendors

           Acquired from home office                                                                                                              

Cost of goods sold                                            

           

III. Prepare the following year-end adjusting entries to:

- Record the branch income on the home office books

- Adjust the deferred profit account to the proper balance

 

IV. Prepare the year-end closing entries for the home office and the branch   

 

V. Prepare the combining statement worksheet as of December 31, 2020 after completing requirements I to IV

 

VI. From the completed worksheet, prepare:

- An income statement and balance sheet for the branch

- An income statement and balance sheet for the home office

- An income statement and balance sheet for combined for home office and branch office

 

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